Correlation Between S A P and Cal Maine

Can any of the company-specific risk be diversified away by investing in both S A P and Cal Maine at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining S A P and Cal Maine into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SAP SE and Cal Maine Foods, you can compare the effects of market volatilities on S A P and Cal Maine and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in S A P with a short position of Cal Maine. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and Cal Maine.

Diversification Opportunities for S A P and Cal Maine

0.12

Correlation Coefficient

S A P  Cal Maine

Average diversification

The 3 months correlation between SAP and Cal is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and Cal Maine Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cal Maine Foods and S A P is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on SAP SE are associated (or correlated) with Cal Maine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cal Maine Foods has no effect on the direction of S A P i.e., S A P and Cal Maine go up and down completely randomly.

Pair Corralation between S A P and Cal Maine

Assuming the 90 days horizon SAP SE is expected to generate 0.51 times more return on investment than Cal Maine. However, SAP SE is 1.97 times less risky than Cal Maine. It trades about 0.06 of its potential returns per unit of risk. Cal Maine Foods is currently generating about -0.02 per unit of risk. If you would invest  23,620  in SAP SE on December 28, 2024 and sell it today you would earn a total of  1,335  from holding SAP SE or generate 5.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SAP SE  vs.  Cal Maine Foods

SAP SE

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, S A P may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Cal Maine Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cal Maine Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cal Maine is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with S A P and Cal Maine

The main advantage of trading using opposite S A P and Cal Maine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P position performs unexpectedly, Cal Maine can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Cal Maine will offset losses from the drop in Cal Maine's long position.

The idea behind SAP SE and Cal Maine Foods pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.